Sagging Economy Will Drive Insurers' Increased Adoption of BPO

A new study from Celent reports that smaller deals from tier-4 insurance companies dominate the BPO market for North America. Celent reports that the industry is expected to enjoy an combined annual growth rate of 10%, growing from $2.3 billion today to $3.7 billion by 2016. However, new activity has trended downward over the last few year, and short-term deals are becoming the norm, according to the Boston-based analyst firm's report.

The downward trend of size and frequency of deals is on the point of reversing, according to Celent. Among the findings of the analyst firm's study, which looked at information from providers on 440 deals where the servicing location was North America were that:

The expectation is that the effect of the Great Recession and the projected low growth of the “new normal” environment will increase insurer adoption of BPO. From the data submitted in this survey, it is clear that this trend has not yet occurred. Deals closed in the last year have continued a trend of decreasing BPO use. While life/annuity/health carriers lead the market in overall revenue, P&C insurers are the largest deal segment in the number of contracts.

Celent also reports that BPO deals have been dominated by a small pool of vendors: "Fifty-six percent of the 81 deals completed in the past two years were closed by five vendors," the analyst reports.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio